* Stocks up but report of Iran missile test jars investors
* All eyes on company earnings as forecasts downgraded
* Crude climbs $1 to $137 on geopolitical tension
(Adds European outlook, updates prices)
By Kevin Plumberg
HONG KONG, July 9 (Reuters) - The U.S. dollar fell and
Asian stocks surrendered some gains on Wednesday, after a
report that Iran tested a missile that could reach Israel,
raising concerns this week's $9 dip in oil prices is only
fleeting.
Crude crept up to session highs above $137 a barrel <CLc1>
and the Swiss franc and yen, currencies that serve as safe
havens in times of market volatility, strengthened after state
media reported Iran fired a Shahab 3 missile capable of hitting
targets 2,000 km (1,250 miles) away. []
European stocks are expected to open broadly 1 percent
higher, according to financial bookmakers, riding a rebound in
global equity markets which hit fresh lows on Tuesday.
"The dollar had been strong and oil prices had been
falling, but the missile firing will rekindle inflationary
concerns," said Fumiyuki Nakanishi, group manager of the
investment information department at SMBC Friend Securities in
Tokyo.
Japan's Nikkei share average <> clung to gains of 0.15
percent, rebounding from a three-month low the previous
session.
Shares of companies in the Asia-Pacific region excluding
Japan <.MSCIAPJ> were up 1.8 percent on the day but down 23
percent on the year-to-date, according to an MSCI index.
The All-Countries world index <.MIWD0000PUS> on Tuesday
slipped to the lowest since October 2006 before rebounding
thanks to a fall in oil prices and a bounce in financial stocks
on Wall Street.
KOREA DIPS
South Korea's benchmark KOSPI <> fell 0.9 percent to
its lowest close since April 2007 as strong gains in the won
weighed on exporters. Shares of LG Display <034220.KS> dropped
5.9 percent ahead of its quarterly results, as investors braced
for what could be a grim reporting season.
The country's finance ministers were out in full force on
Wednesday, trying to calm the frayed nerves of investors who
have knocked Korean shares down nearly 19 percent this year.
"I acknowledge there are difficulties but corporate profits
are relatively good and fund flows around the stock markets are
abundant," Vice Finance Minister Kim Dong-soo said at a hastily
arranged meeting to discuss markets. "I hope investors will not
react too sensitively."
More companies have seen their earnings expectations
downgraded in recent days to reflect the crippling combination
of higher costs and sluggish demand.
"Eyes are on corporate earnings and their outlook
comments, and investors will react ruthlessly to disappointing
numbers or comments at times like this," said Won Jong-hyuk, an
analyst at SK Securities in Seoul.
"Foreign investors will probably react more sensitively to
U.S. bank earnings. Some signs of changes for the better are
much awaited," Won added.
MORE EARNINGS TO COME
Fed Chairman Ben Bernanke said overnight the central bank
was willing to keep its emergency lending facility open into
2009, calming investors after a Lehman Brothers research report
said the two largest U.S. mortgage funders may be forced to
raise a combined $75 billion in capital. []
Those comments helped to lift shares in the U.S. financial
sector 5.7 percent and supported the dollar before the report
of the Iran missile test.
The euro rose 0.3 percent to $1.5718 <EUR=>, while the
dollar was down 0.3 percent at 107.11 yen <JPY=> and off 0.5
percent against the Swiss franc at 1.0275 francs <CHF=>.
Since mid-March, when the Fed backed a plan for JPMorgan
effectively to bail out Bear Stearns after a run on the bank
pushed it to near bankruptcy, the dollar has stabilized. The
New York Board of Trade's U.S. dollar index <.DXY> has risen a
modest 2 percent since then.
U.S. aluminium company Alcoa inc <AA.N> kicked off the
earnings season on an upbeat note, after it reported
better-than-expected quarterly earnings. Industrial
conglomerate General Electric <GE.N> and South Korea's POSCO
<005490.KS>, the world's fourth-largest steel maker, will both
report results on Friday.
Consensus forecasts of 6.7 percent earnings growth in Asia
excluding Japan have fallen from 11.5 percent at the beginning
of the year, though earnings are at risk of growing by less or
even contracting this year, according to some analysts.
"Expectations six months ago were that the economy was
booming and that's clearly not the case," said Hans Kunnen,
head of investment markets research at Colonial First State in
Sydney.
Japanese government bonds erased its losses after the news
on Iran caused the Nikkei to pare gains.
The benchmark 10-year yield <JP10YTN=JBTC> was largely
unchanged at .1.61 percent.
(Additional reporting by Aiko Hayashi in TOKYO, Geraldine Chua
in SYDNEY and Park Jung-youn in SEOUL; Editing by Lincoln
Feast)
